Q1 2014 Investor Presentation

Investor RelationsPresentation

June 2014

Best way to invest in fast growing global energy efficiency and renewable energy generation businesses

1BM&F Bovespa: WEGE3 / OTC: WEGZY

n One of the highest growth capital goods companies; number one or number two in all product lines in Latin America

n Unique business model is based on vertical integration, production flexibility and technological innovation

n Diversified product lines allows strong growth across different market cycles

n We have a history of achieving CAGR of 18% over past 17 years through organic growth and accretive acquisitions

n WEG 2020 Strategic Plan aims for R$ 20 billion / 17% CAGR through international and product line expansion

1

2

3

4

5

June 2014

19,3%

23,1%

9,1%

11,3%

6,3%5,2%

4,0%

6,6%4,9%

3,7% 3,0%1,7%

-0,1%

-3,0%

A WEG B C D E F

CAGR 2005-2009

CAGR 2009-2013

Sustainable growthWEG’s revenue growth and margins are among the highest in the industry


Revenues Growth (US$) Profitability (EBITDA Margins)

WEG

B

F

E

C

A

D

8,0%

10,0%

12,0%

14,0%

16,0%

18,0%

20,0%

22,0%

24,0%

2009 2010 2011 2012 2013

June 2014

Energy and industrial efficiency

Renewable energy Smart grid Electrical mobility

Electric motors represent around 70% of all industrial consumption of electricity, or 25% of worldwide general electricity consumption;

Electricity consumption is by far the largest component of total cost of ownership of electric motors (may exceed 95%) for industrial clients;

Clear regulatory trend towards minimum levels of electric motor energy efficiency (lower needs to expand generation);

Industrial productivity and energy management drives investments.

Global drive to lower GHG emissions;

Renewables allow distributed generation, closer to consumption and requiring lower T&D infrastructure;

Economic viability is highly dependent on scale. With correct price incentives, technology catches up with economics;

Diversity of sources increases systems stability and energy availability. No energy is the most expensive energy of all.

Increasing urbanization adds to congestions and need of alternatives;

GHG and other pollutants emitted by internal combustion engines powered vehicles are well above sustainable levels;

Electricity is clearly a more efficient use of energy to power vehicles. Pure electric, hybrids and alternative fuels will grow faster than the market;

Powertrain solutions are scalable to all vehicle types and sizes and to other transportation modes (WEG has commercially available solutions in maritime powertrains)

Electricity distribution grid is evolving and becoming ”smarter”;

All nodes of the system, from generation to consumptions (and everything in between) must be aware of conditions and able to respond to changes;

Every existing electric product must evolve. There will be more sensors, more automation, more efficient generation and use of electricity;

New products are being developed and change is just now starting.

Our industry is undergoing major shiftsMegatrends are creating changes in demand patterns and new business opportunities


June 2014

WEG’s strategic vision is to provide complete and efficient solutions with a complete line of electrical machines, from the generation all the way to the consumption.

This means that we want to continue to be a competitive supplier of electrical equipment for typical applications. For example, WEG is one the world's largest supplier of industrial electric motors used by OEM in the manufacturing pumps, compressors

“End to end of the wire”The global solution in electric machines and automation for the industry and energy systems


and industrial fans, the typical uses of such products.

We also can use this production competitiveness and flexibility and our broad product line to integrate those products into a complete solutions.

We can combine electric motors of several types and sizes with the drives and controls to create complex industry automation systems. Or complete solutions for electricity generation from

renewable sources. Or complete energy substations for just about any use. Important to note that these systems are basically comprised of WEG manufactured products.

This integrated approach based on competitive manufacturing capabilities has been the basis of our market presence and how we present ourselves to our clients and to the general market.

Generation Transmission Distribution Industrial use Electric traction

Building

Automation

June 2014

Strategic PositioningWEG offers a complete range of electric products and systems with an integrated one-stop solution


Mot

ors

Fractional

Industrial

High Voltage

Gear boxes

Ener

gy

Alternators

Thermal (Biomass)

Small Hydro

Wind

Solar

T&D

Power Trafos

Dry Trafos

Distribution Trafos

Substations

Auto

mat

ion Drives

Controls

Panels

June 2014

Clear competitive advantagesUnique business model creates important and defensible competitive advantages

DiversificationVertical Integration

Financial Flexibility

Modular Expansion

Global Presence

Vertical integration allows production flexibility to competitively supply small batches of highly customized products that are matched to perfection to our customers’ needs. We do mass customization, not mass production.

Our production flexibility allows us to target the markets

(geographies, segments and products) that offer the best growth perspectives. It also

allows us to target markets based on returns, not on our needs to occupy specialized production

capacity.

Financial flexibility allows WEG to pursue growth opportunities as they become available. These opportunities range from trivial, like raw materials procurement at attractive conditions, to strategic, like acquisitions .

The diversity of our product offering also allows us to expand internationally, leveraging the expertizes we have developed into new markets and being a

premier partner for our global customers

Our production system is also based on modular expansion,

avoiding idle capacity build up, maximizing returns on capital e

lowering demand risks.


June 2014

WEG businessDiversified product line allows for strong growth across different market cycles


Automation Electric Motors

Paints and Varnishes

Industrial Electro-Electronic Equipment Motors for domestic use

Coatings

Automation

Energy T&D

Energy Generation, Transmission and Distribution (GTD)

Electric Motors

June 2014

10,4%

13,5%

14,7%

15,9%

12,1%

10,0%10,3%

11,8%

14,3%

353

372

466

527

628

800 1.06

6

1.28

2

1.69

4 2.20

4

2.51

5 3.00

9 3.74

9 4.50

2

4.21

1

4.39

2 5.18

9

6.17

4 6.82

9

30

41

58

98

82 125 17

6 220 30

8 403

375 50

3 575

560

549

519 58

7 656

843

10,9%12,6%

18,5%

13,1%

15,7% 16,5% 17,2%18,2% 18,3%

14,9%16,7%

15,3%

12,4% 13,0%11,8% 11,3% 10,6%

12,4%

59

67

96

119

133 18

8 256

293 38

1 475

462

617

839

1.02

1

812

789 85

1

1.01

7

1.23

0

18,1%

20,7%22,5%

21,2%

23,5% 24,1%22,8% 22,5%

21,5%

18,4%

20,5%22,4% 22,7%

19,3%18,0%

16,4% 16,5%18,0%

Revenues (R$ million)

Solid growth track recordBusiness model allows us to find and explore growth opportunities, even under unfavorable macroeconomic conditions


EBITDA (R$ million) and EBITDA Margin

CAGR 20.4%

Net Income (R$ million) and Net Margin ROIC

CAGR 17,9%

CAGR 18.4%

June 2014

WEG Strategic planning processWe adopted a bottom–up approach, selecting the individual opportunities that offered the best fit to clear strategic guidelines


OpportunitiesDiscovery

Business analysis

The process started with the involvement of management at all levels, from market-facing mid-level managers to senior C-level officers, that discussed recent evolution, trends and growth opportunities, current and future, in all our core and adjacent markets.

The ideas were developed into business plans, including market assumptions, earnings and cash flow projection models, so each opportunity could be assessed in terms of its expected results and margins.

Capital Requirement analysis

The analysis then considered the capital intensity of each opportunity. The results and margins are not necessarily good or bad, they must be considered within the context of the capital required to pursue the growth opportunity. The net result is ROIC.

Risk adjusted ROIC analysis

Finally, each opportunity was assessed in terms of identifiable, business-related, non-systemic risks. This was then used to adjust the ROIC, or ROIC’

June 2014

4.39

2

5.18

9

6.17

4

6.82

9

20.0

00

18% 19%11%

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

WEG Strategic Plan 2020Corporate aspiration of R$ 20 billion by 2020. Growth comes from diverse base, with a disciplined approach to organic and non-organic expansion


1/3 Non Organic

2/3 Organic

CAGR 17.9%

CAGR 17%

20.0

00

Base

June 2014

Our products / markets enjoy fairly healthy

organic growth trends. For example, the global

market for industrial use electric motors is

independently estimated to grow 5% to 10% per

year. If we are able to maintain our market

positions, either leadership and / or strong brand

recognition, we will be in position that advantage

of this healthy growth dynamics;

Growth driversThe growth opportunities identified can be separated into three distinct categories/growth strategies


We will continue to expand into

new geographies, initially with

industrial electric motors. As

we have established market

positions and/or recognized

brands, we will leverage those

to synergistically expand the

product line.

We will also continue to

expand the product line into

business / products that

complement the offering and

allows us to offer our clients

more complete and efficient

solutions.

International Expansion

International Expansion

New Businesses

New Businesses

“More and Better”

“More and Better”

June 2014

Technology

Mar

ket

Acc

ess

2010

2010

2010 2010

2011

20112011

2011

2012

2012

2012

Portfolio StrategyClear vision of attractiveness of opportunities and of the strategic fit


March 2014

February 2014

September 2013

June 2014

Revenue profile


2013

2008

June 2014

50%

35%

15%

2013

Global production platform


Produced and sold in BrazilProduced in Brazil and exportedProduced and sold abroad

65%

31%

4%

2008

June 2014

0,0%

10,0%

20,0%

30,0%

40,0%

50,0%

1Q06 1Q07 1Q08 1Q09 1Q10 1Q11 1Q12 1Q13 1Q14

Working Capital

InventoriesClients

SuppliersAdvances

Capex (R$ million)

Use of cash


Research & Development (R$ million)

Net Earnings and Dividends (R$ million)

42 38 49 73 83 126

206 146

111

305

457

226 233 188

238 244

8,0%

6,1%6,1%6,8%

6,5%

7,4%

9,3%

5,8%

3,7%

8,1%

10,2%

5,4%5,3%

3,6% 3,9%3,6%

% of Net Revenues

16 18 18 21 30 34

63 73

86 89 83 101

131 148

183

2,5%2,3%

1,7% 1,6%1,8%

1,5%

2,5% 2,4%2,3%

2,0% 2,0%

2,3%2,5%

2,4%2,7%

% of Net Revenues

Working Capital (% of Net Revenues)

June 2014

Issuer

Ticker

Number of Shares

Share price

Market value

WEG S.A.

WEGE3 (BM&Fbovespa) / WEGZY (OTC – ADR Level 1).

Listing Segment Novo Mercado (since 2007)

Issued: 807,176,538In treasury: 615,564Ex-treasury: 806,560,974

On Dec 30, 2013: R$ 23.97 On May 30, 2014 : R$ 26.01

On Dec 30, 2013: R$ 19.3 billionOn May 30, 2014 : R$ 21.0 billion

Liquidity (average daily volume)

In 2013: R$ 15,193 thousand / day In 2014: R$ 15,896 thousand / day

Composition of Free Float

56% - Foreign institutions03% - Brazilian institutions 41% - Others (individuals, etc.)

Capital markets information


June 2014

35%50%14%

WEG S.A.WEG S.A.

Voigt33.3%Voigt

33.3%Silva

33.3%Silva

33.3%Werninghaus

33.3%Werninghaus

33.3%

Treasury and ManagementTreasury and Management

WPA Participações e Serviços S/A

WPA Participações e Serviços S/A

Founders’ Families (directly)

Founders’ Families (directly)

Free FloatFree Float

1%

Shareholding structure


June 2014

6,00

8,00

10,00

12,00

14,00

16,00

18,00

20,00

22,00

24,00

26,00

28,00

WEG

E3 s

hare

pric

es (R

$)

18

WEGE3 performance


InclusionMSCI Brazil

InclusionIbrx-100

Selected forISE 2013

Selected forISE 2014

HighlightsYearly Figures


2013 2012 % 2011 %

Net Operating Revenue 6.828.896 6.173.878 10,6% 5.189.409 19,0% Domestic Market 3.432.040 3.016.662 13,8% 2.902.958 3,9%

External Markets 3.396.856 3.157.216 7,6% 2.286.451 38,1% External Markets in US$ 1.569.891 1.610.330 -2,5% 1.361.689 18,3%Gross Operating Profit 2.236.766 1.880.856 18,9% 1.556.051 20,9%Gross Margin 32,8% 30,5% 30,0%Quarterly Net Income 843.467 655.979 28,6% 586.936 11,8%Net Margin 12,4% 10,6% 11,3%EBITDA 1.230.032 1.016.748 21,0% 851.155 19,5%EBITDA Margin 18,0% 16,5% 16,4%EPS 1,35950 1,05730 28,6% 0,94605 11,8%

Figures in R$ Thousands

HighlightsQuarterly Figures


Q1 2014 Q4 2013 % Q1 2013 %

Net Operating Revenue 1.783.543 1.893.299 -5,8% 1.477.577 20,7% Domestic Market 895.446 913.388 -2,0% 772.935 15,9% External Markets 888.097 979.911 -9,4% 704.642 26,0%

External Markets in US$ 375.677 428.229 -12,3% 353.077 6,4%Gross Operating Profit 570.421 615.847 -7,4% 463.604 23,0%Gross Margin 32,0% 32,5% 31,4%Net Income 204.887 237.439 -13,7% 172.299 18,9%Net Margin 11,5% 12,5% 11,7%EBITDA 299.643 341.653 -12,3% 248.898 20,4%EBITDA Margin 16,8% 18,0% 16,8%EPS 0,33023 0,38270 -13,7% 0,27772 18,9%

Figures in R$ Thousand

HighlightsBalance sheet – Assets


(R$ thousands)

R$ % R$ % R$ % (A)/(B) (A)/(C)CURRENT ASSETS 6.602.879 67% 6.851.787 68% 6.310.741 66% -4% 5%

Cash & cash equivalents 3.247.375 33% 3.373.799 33% 3.279.518 35% -4% -1%

Receivables 1.576.829 16% 1.658.806 16% 1.347.331 14% -5% 17%

Inventories 1.461.766 15% 1.445.927 14% 1.316.606 14% 1% 11%

Other current assets 316.909 3% 373.255 4% 367.286 4% -15% -14%

LONG TERM ASSETS 134.326 1% 123.866 1% 107.528 1% 8% 25%Long term securities 2.097 0% 2.230 0% 2.059 0% - 2%Deferred taxes 68.870 1% 60.376 1% 43.337 0% 14% 59%

Other non-current assets 63.359 1% 61.260 1% 62.132 1% 3% 2%

FIXED ASSETS 3.161.488 32% 3.165.640 31% 3.078.166 32% 0% 3%

Investment in Subs 8.091 0% 7.264 0% 7.577 0% 11% 7%

Property, Plant & Equipment 2.605.834 26% 2.614.556 26% 2.544.242 27% 0% 2%

Intangibles 547.563 6% 543.820 5% 526.347 6% 1% 4%

TOTAL ASSETS 9.898.693 100% 10.141.293 100% 9.496.435 100% -2% 4%

March 2013(C)

March 2014(A)

December 2013(B)

HighlightsBalance sheet – Liabilities


(R$ thousands)

R$ % R$ % R$ % (A)/(B) (A)/(C)CURRENT LIABILITIES 2.506.714 25% 2.578.048 25% 2.852.160 30% -3% -12%

Social and Labor Liabilities 199.637 2% 216.553 2% 172.007 2% -8% 16%

Suppliers 379.952 4% 420.250 4% 365.492 4% -10% 4%

Fiscal and Tax Liabilities 137.847 1% 139.570 1% 103.069 1% -1% 34%

Short Term Debt 914.246 9% 912.796 9% 1.526.274 16% 0% -40%

Dividends Payable 47.016 0% 87.723 1% 36.718 0% -46% 28%

Advances from Clients 469.261 5% 459.130 5% 306.889 3% 2% 53%

Profit Sharring 44.201 0% 34.191 0% 38.260 0% 29% 16%

Other Short Term Liabilities 314.554 3% 307.835 3% 303.451 3% 2% 4%

LONG TERM LIABILITIES 2.822.456 29% 2.920.978 29% 2.528.789 27% -3% 12%

Long Term Debt 2.192.311 22% 2.296.208 23% 1.878.432 20% -5% 17%

Other Long Term Liabilities 98.307 1% 95.031 1% 123.063 1% 3% -20%

Deferred Taxes 292.073 3% 294.405 3% 319.621 3% -1% -9%

Contingencies Provisions 239.765 2% 235.334 2% 207.673 2% 2% 15%

MINORITIES 77.959 1% 84.495 1% 80.931 1% -8% -4%

STOCKHOLDERS' EQUITY 4.491.564 45% 4.557.772 45% 4.034.555 42% -1% 11%

TOTAL LIABILITIES 9.898.693 100% 10.141.293 100% 9.496.435 100% -2% 4%

March 2013(C)

March 2014(A)

December 2013(B)

HighlightsBalance sheet – Cash flow


(R$ thousands)

3 Months 3 Months2014 2013

Operating ActivitiesNet Earnings before Taxes 269.317 221.413 Depreciation and Amortization 58.805 52.136 Provisions: 88.495 67.655 Changes in Assets & Liabilities (12.641) (6.294)

(Increase) / Reduction of Accounts Receivable 118.511 91.360 Increase / (Reduction) of Accounts Payable 50.259 46.754 (Increase) / Reduction of Investories (10.915) (10.480) Income Tax and Social Contribution on Net Earnings (81.448) (71.190) Profit Sharing Paid (89.048) (62.738)

Cash Flow from Operating Activities 403.976 334.910

Investment ActivitiesFixed Assets (64.284) (56.759) Intagible Assets (3.208) (811) Results of sales of fixed assets 490 903 Accumulated Conversion Adjustment (53.618) (25.135) Long term securities bought 132 (4.497) Goodwill in Capital Transactions (2.699) (5.169)

Acquisition of Stakes of non-controlling shareholders (5.947) (6.268)

Aquisition of Subsidiaries (13.229) -

Cash Flow From Investment Activities (142.363) (97.736)

Financing ActivitiesWorking Capital Financing 16.382 827.186 Long Term Financing (112.601) (136.811) Interest paid on loans and financing (43.588) (11.277) Treasury Shares - - Dividends & Intesrest on Stockholders Equity Paid (248.230) (204.724)

Cash Flow From Financing Activities (388.037) 474.374

Change in Cash Position (126.424) 711.548

Cash & Cash Equivalents

Beginning of Period 3.373.799 2.302.256

End of Period 3.247.375 3.013.804

HighlightsBalance sheet – Debt and cash position


(R$ thousands)

Cash & Financial instruments 3.249.472 3.376.029 3.281.577

- Current 3.247.375 3.373.799 3.279.518 - Long Term 2.097 2.230 2.059

Debt 3.106.557 100% 3.209.004 100% 3.404.706 100%

- Current 914.246 29% 912.796 28% 1.526.274 45%

- In Brazilian Reais 503.749 16% 462.336 14% 1.077.205 32%

- In other currencies 410.497 13% 450.460 14% 449.069 13%

- Long Term 2.192.311 71% 2.296.208 72% 1.878.432 55%

- In Brazilian Reais 1.976.524 64% 2.048.766 64% 1.646.899 48%

- In other currencies 215.787 7% 247.442 8% 231.533 7%

Net Cash (Debt) 142.915 167.025 (123.129)

Março 2014 Dezembro 2013 Março 2013

June 2014

WEG Investor RelationsContacts

Sérgio Luiz Silva SchwartzInvestor Relations Officer

Luís Fernando M. OliveiraInvestor Relations Manager +55 (47) 3276-6973 [email protected]/weg_ir

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